Monday, June 25, 2007

Housing Market Continues to Soften

From today's WSJ: "Existing-home sales dipped during May to their lowest level in nearly four years, while inventories climbed and prices fell a 10th straight time.

Home resales fell to a 5.99 million annual rate, a 0.3% decrease from April's revised 6.01 million annual pace, the National Association of Realtors (NAR) said Monday. April's rate was originally estimated at 5.99 million.

The median home price was $223,700 in May, down 2.1% from $228,500 in May 2006. The median price in April this year was $219,800. The 2.1% drop marked the 10th consecutive year-over-year price decline.

Inventories of homes rose 5.0% at the end of May to 4.43 million available for sale, which represented an 8.9-month supply at the current sales pace (see chart above, click to enlarge). There was an 8.4-month supply at the end of April, which was unrevised from a previous estimate."

MP: Although they don't get as much attention as median home price and number of homes sold, I think the housing inventory measures probably give us the best insight into the condition of the housing market.

In 2004, there was an average inventory of 2,244,000 homes for sale, homes were selling at the rate of about 564,800 per month, meaning that there was 4.3 months supply of houses at the current sales pace, according to the NAR.

By May 2007, the inventory of homes for sale has almost doubled to 4,431,000, which represents a 8.9-months supply at the current monthly sales rate of 500,000 (see chart above).

Although the NAR doesn't report national figures on the "average time on the market," it would be safe to assume that since both a) the inventory of homes and b) the months supply of homes has more than doubled since 2004, the average time on the market before a home sells has probably also doubled.